Saturday, December 7, 2019
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Spread realty investment risk as wide as possible

In Dubai, we have seen huge prices increases in the property market, with some projects seeing growth of almost 40 per cent in one year. Surely this kind of growth is unsustainable? What really baffles me is the same people who got caught and lost money through over-speculating in 2007-08, leaving themselves hugely exposed, are the same people adopting the same impulsive buying tactics this time round.

While I’m not telling people not to buy property in Dubai, I am telling people to be very cautious and not over expose themselves financially.

When prices increase so aggressively in such a short space of time, generally it’s not too long before the market overheats, buying slows down, prices reduce and people lose money. What is a little scary is just how quickly off-plan projects are selling out up on launch.

There have been various launches in the Downtown which have sold fully in hours. What is disappointing is that the next day a huge percentage of the units sold are appearing on the ‘secondary’ market with premiums of 20 per cent. This clearly needs to stop as the prices are just too high and have no reason to be so.

Buyers paying just a 10 per cent deposit and then selling the property as quickly as possible for the highest premium they can get are spoiling the market.

I believe we really need to see some intervention from developers or the Dubai Land Department, where properties cannot be resold until the original buyer completes on the property. This method is what other more established markets have adopted in the past which keeps prices ‘steady’ and prevents the ‘bubble’ from happening all over again. It’s a great city but it doesn’t mean we should buy five properties here… 2014 is all about diversifying, spreading risk, learning from past mistakes and making smart investment decisions.

The UK property market had a great year in 2013 relative to previous years. Banks started to show signs of confidence and started to lend again, the government incentive to help first-time buyers really did gain pace and proved a huge success.

Sections of the UK market I have been looking at closely over the past year-or-so are locations on the London commuter belt where I see fantastic value — locations such as Bromley, Lewisham, Wandsworth and Greenwich. Most of these are locations which don’t spring to mind when you mention the word ‘London’. People generally mention Kensington, Chelsea and Knightsbridge when talking about this region, however when buying property for an investment, one needs to keep focused on why you’re buying.

You’re buying as an investment which means you’re buying to make money, and I don’t know too many people who invest to lose money!

Keeping the word ‘investment’ in the forefront of your mind when buying an investment property is key. Often buying a property can have an emotional side to it as people often want to buy a property with a nice view or a big kitchen, or buy on the same street as their parents. Most of these requirements are emotionally driven, especially when you’re never going to live there yourself, as it’s an investment.

Prime Central London has seen strong growth over the last three years and prices will continue to grow in 2014, albeit at a little slower pace than 2013. Not everyone wants or has the capacity to pay £1 million for a one-bedroom apartment in Chelsea, and so people should now start looking for value in locations which have strong transport links into Central London but have not yet seen the price growth that Prime London has.

Bromley, Lewisham, Wandsworth and Greenwich are locations which offer great value — they aren’t household name locations but they are locations which look very appealing as an investment.

As ultra-prime London gets more and more expensive, people should look for value in other pockets. My advice is, instead of buying that property in Chelsea at a million pounds, buy two or three in and around Central London at lower values, spreading risk and diversifying your exposure.

— The writer is director and head of IP Global M.E.